A Closer Look At Netflix's Content Strategy

The Netflix Inc. application (app) displays the and "Orange is the New Black" series on an Apple Inc. iPhone 5s in this arranged photograph in Washington, D.C., U.S., on Wednesday, July 9, 2014. Photographer: Andrew Harrer/Bloomberg

Netflix‘s Q1 2017 results were quite encouraging. The company continued its strong run with significant growth in its international subscribers. While the company’s domestic subscriber growth has been slowing down, as competition in the streaming segment intensifies, the company was still able to add around 1.5 million domestic subscribers in the first quarter. As players such as Hulu and Amazon invest heavily in quality content, we believe the streaming war will be fought largely on original content. While Amazon is looking to acquire live sports broadcasting rights, Netflix is clear that its focus will remain on quality movies and TV shows.

Original Content, Stand Up Comedy, Movies To Be Key Growth Drivers

Netflix, in its letter to its shareholders, stated that it will work on a wide variety of content to satisfy the diverse tastes of its global audience. The company’s strategy is to focus on original content to drive growth, and it is not currently looking to stream live events or sports. Netflix is also increasing its focus on stand-up comedy, which it believes can be a key growth driver in future. Movies are another focus area for the company, and it recently hired Scott Stuber to lead its original film initiatives. Netflix is aiming to build a portfolio of movies which will attract and retain viewers and optimize the cost of licensing these movies in relation to the number of subscribers who watch them. The company has categorically stated that its focus is on “on-demand commercial free viewing rather than live, ad-supported programming.” This should help Netflix to stand out from its competitors and attract more subscribers.

Netflix is clear that it will invest its content budget in high quality shows and movies rather than live events to attract subscribers. We expect this strategy to work in the company’s favor as it looks to differentiate itself from competitors based on its strong content. While several players including Amazon and Hulu are increasing their content budgets, and Amazon’s budget is very close to that of Netflix, the strategies in allocating these budgets are likely to differentiate the two giants. Netflix is establishing its identity as an on-demand content provider rather than a live streaming player, and we expect this strategic focus to drive continued growth for Netflix in the long term.